February car sales rise 13% on price hike fears

NEW DELHI: Car sales shot up in February as customers, fearing higher excise and new taxes on diesel vehicles after the upcoming Union Budget on Friday, booked their vehicles in a hurry.

Sales rose 13% in February to 2,11,402 units - also the highest pace of growth since April 2011 - from 1,86,890 units sold in the same month last year, according to data issued by the Society of Indian Automobile Manufacturers (SIAM) on Monday.

This is the first time ever that monthly car sales crossed the two-lakh unit mark. Sales had grown by 7.2% in January, 8.5% in December and 7.5% in November. It is also expected that demand will pick up if the tax structure remains unchanged at the Budget.

SIAM is expecting some rollback of excise duty that was given as stimulus during the 2008-09 slowdown. "The perception of higher prices, as the government may roll back 2% excise concession given to the auto sector, and impose new taxes to garner more revenue is driving the current demand for cars and two-wheelers," SIAM director general Vishnu Mathur said.

The demand for petrol cars, however, has been largely muted in the current fiscal year due to higher fuel prices. The preference has shifted to diesel-powered cars and sports-utility vehicles that now form around 45% of the total passenger vehicles sold in India. The government controls diesel prices in India - it is a good 40% cheaper than petrol - which is driving demand, besides the higher fuel-efficiency offered by such vehicles over gasoline.

Major carmakers like Maruti, Hyundai and Tata Motors were the biggest gainers in terms of sales in February. Country's largest carmaker Maruti Suzuki's sales jumped 7% to 94,118 vehicles, while rival Hyundai Motor India's sales grew by a higher 13% to 36,658 cars. Mumbai-based Tata Motors' sales rose 5.46% to 28,236 units in the same month over last year.

"The demand for new cars is sweeping back. Customers are willing to buy new cars at the current prices with a substantial increase in footfalls at our dealership in recent months. The momentum could be impacted if there are any adverse measures like higher taxes or preference to any particular fuel of vehicles," said a senior Maruti executive, preferring not to go on record.

Analysts tracking the sector say that stable interest rates on auto loans are also firing up the market. "There has been an improvement in sentiment as consumers are no longer expecting increase in interest rates. Stability in rates by most banks have helped increase car sales as well as propelled demand for other segments while the future is largely dependent on the measures adopted by the government in the Budget," said Sageraj Bariya, managing partner at Equitorials, a Mumbai-based consultancy.

According to SIAM, improved performance by other segments also improved the macro scenario of the domestic auto market, with the exception of three-wheelers that declined in February to 14% to 42,242 units compared to 48,878 units last year.

Two-wheeler sales in February jumped 12% to 11.44 lakh units while with scooters leading the charge and grew 28% to 2.37 lakh units last month. While motorcycle sales during the month grew by lower 8% 8.38 lakh units. The sale of commercial vehicles zoomed 19% to 76,891 units from 64,775 units in the year-ago period, fired mainly by light commercial vehicle sales that rose 31% to 43,982 units.